Financing Your Dental School Education

1. Financing Your Dental School Education Key Messages for Matriculating and Future Dental Students September 2011 Prepared by ADEA Division of Educational Pathways, September 2011

2. Key messages: • While expensive, dental education is an affordable and worthwhile investment • Multitude of financing options and types of financial aid available • Smart budgeting and responsible borrowing help minimize long term impact • You are ultimately responsible for paying for school, but help exists

3. Facts about the Dental Workforce Source: 2010 American Dental Association Dental Workforce Model: 2008-2030

4. Discussion topics • Credit and student loans • Learn from your colleagues, old and new • Getting started and resources to help

5. Discussion topics

6. Out-of-pocket costs * May also be referred to as Financial Aid Budget (ask your Financial Aid Office)

7. Financing costs • Costs associated with borrowing loans • Factors include: • Interest rates and capitalization frequency* • Use of postponement options • Repayment strategy and repayment term • No penalty for aggressive repayment • Ask for help paying interest as it accrues to reduce impact of capitalization * How often accrued and unpaid interest is added to the original amount borrowed

8. Key takeaways • Cost will vary among dental schools • Focus on costs you can control • Start and maintain strong relationship with your Financial Aid Office • Smart budgeting starts year one and continues throughout duration of your program

9. Discussion topics

10. How aid is determined • Ask and answer three simple questions: • What does it cost? See FAO for D1 COA* • How much do I have? Take stock of your resources, ask for help, and complete the FAFSA to ensure eligibility for federal aid • How much more do I need? Your Financial Aid Award Letter will indicate the combination (package) of grants and scholarships, loans, and other aid you may be eligible for * You apply for aid annually, but always look at total cost over entire program

11. Types of financial aid • Grants and scholarships • Student loans • Education tax breaks • Research fellowships and traineeships • Work-Study

12. Grants and scholarships • Every free dollar is one you don’t have to borrow and repay • Three types • Institutional grants and scholarships • Outside scholarships • Scholarships tied to service commitment • Contact your Financial Aid Office for information on applications and deadlines

13. International students • Borrower must be U.S. citizen or Permanent Resident to received federal aid • Scholarships may be available • Check with FAO • Check with your embassy • Loans may be available • Check www.edupass.org/finaid • Creditworthy cosigner may be required

14. Discussion topics

15. Consider these goals • Manage your student loan debt, don’t let it manage you • Borrow responsibly and lessen chance debt will drive career decisions • Don’t live like a practicing dentist until you are a practicing dentist • Consider mindset of repaying student loans in less than ten years

16. Some considerations • Apply early for best financial aid available to reduce amount you need to borrow • Use caution when considering consumer or private loans • Greater repayment flexibility with federal loans when compared with private loans • May borrow up to COA with federal student loans (Stafford and Grad PLUS)

17. Educational debt • Nearly 1 in 5 had no educational debt or debt lower than $80,000 • 91% of graduates have student loan debt • $180,644 mean debt indebted graduates • $155,407 (graduates of public schools) • $215,330 (graduates of private schools) • Nearly 1 in 5 had debt over $250,000 Source: ADEA 2009 Survey of Dental School Seniors

18. Changes in financial aid • Elimination of interest subsidy on new Stafford Loans effective July 1, 2012 • Elimination of discount for timely payments • Challenges with federal government’s credit rating could eventually mean higher rates on student loans

19. Should you be concerned about Stafford subsidy loss? Withsubsidy Without subsidy No Sub Stafford $162,000 Unsub Stafford 6.8% fixed rate 6 month grace period $2,187/month for 10 yrs $262,382 total repaid $100,382 total interest cost • $34,000 Sub Stafford • $128,000 Unsub Stafford • 6.8% fixed rate • 6 month grace period • $2,119/month for 10 yrs • $254,267 total repaid • $92,267 total interest cost * Difference of $68 per month and $8,115 total interest over ten years

20. Federal loan programs • Direct Stafford* • Direct Grad PLUS* • Perkins** • Health Professions Student Loan (HPSL)** • Loans for Disadvantaged Students (LDS)** • Institutional** • Private • * Majority of borrowing likely from these programs, especially Stafford * * Contact FAO for information on application process and deadlines

21. Sample repayment

22. Repayment strategies • Aggressively repay to help minimize impact of interest and capitalization • Maximize monthly cash flow to free up cash for other commitments • Enroll in program that helps repay loans in exchange for service commitment • Work in public service and have eligible loans forgiven after designated period

23. Examples of loan repayment programs tied to service • Armed Forces • Faculty Loan Repayment • Federal Student Loan Repayment • Indian Health Service • National Health Service Corps • National Institutes of Health

24. Public Service Loan Forgiveness • Relatively new program for highly indebted borrowers committed to public service • Balance forgiven on eligible loans* after 120 eligible payments made while working in public service position * Direct Stafford, Direct Grad PLUS, Direct Consolidation (without Parent PLUS)

25. Key takeaways

26. Discussion topics

27. Credit “Double Whammy” • Over one third of credit score from repayment history* • Many dental students have a thin credit file • Consider the credit “Double Whammy” • You do not start repayment until after school, so difficult to increase credit score in school • With thin file, even one late payment can have strong adverse impact on your credit Source: www.MyFICO.com/crediteducation

28. Credit Ready vs. Credit Worthy * Debt-to-Income (some lenders want proof of income before approving loan)

29. Key takeaways • Consumer debts, including credit card payments, cannot be added to COA • Take steps now to ensure balances paid in full prior to matriculation or that funds have been secured to make payments • Protect your credit in dental school and ensure strong history when you graduate

30. Discussion topics

31. Danielle: Class of 2004

32. Danielle: Class of 2004 • Repayment strategy and particulars • Received community-based scholarships UG but still had $30,000 UG debt • Borrowed additional $100,000 in dental school • Consolidated for convenience and selected repayment plan based on income • Entered academics in 2006 as faculty member • Pursued loan repayment program for minority/disadvantaged faculty

33. Danielle’s comments • No initial interest in academics, but was open to options best suited for my needs • Income less than private practice, but academics turned out to be sound move • Fellowships and loan repayment reduce debt • Benefits of faculty appointment including vacation, health insurance, retirement • Meeting career goal of giving back to community

34. Dionne: Class of 2009

35. Dionne: Class of 2009 • Repayment strategy and particulars • Borrowed $240,000 in dental school, with maximum Stafford and remainder in Grad PLUS • Qualified for IBR* during residency due to relatively low income and dependent • Plans to enter non-profit rural community-based dentistry with hopes of qualifying for Public Service Loan Forgiveness • Potential forgiveness amount over $80,000 * Income Based Repayment with payments capped at 15% of discretionary income

36. Dionne’s comments • Knew she would have to borrow substantially during dental school • Was willing to give up higher salary for community-based work with lower salary and potential for help with student loans through new forgiveness program • Knows she can move into for-profit position later, if her plans change, then accelerate payments

37. Stevie and Don: Class of 2011

38. Stevie and Don: Class of 2011 • Current repayment strategy and particulars • Don has $200,000 outstanding in student loans, including $25,000 private loans from post-baccalaureate program • Stevie has $194,665 in student loan debt, all federal, and all from dental school

39. Comments from Stevie and Don • Don is ruing the day he took out private loans, as their deferment options are up and he must enter repayment now while his federal loans are deferred • He had no cosigner and marginal credit when he took out private loans, and current rate is Prime plus 8.0% • Stevie has opted for Extended Repayment (25 years) on her loans to help minimize payments with intention of helping Don aggressively repay private loans • While still worth it, Don wishes he had borrowed more responsibly and listened to counsel of FAO regarding disadvantages of private loans

40. Bradley: Class of 2016

41. Bradley: Class of 2016 • Current repayment strategy and particulars • $162,000 principal borrowed (Stafford Loans) • $189,999 expected to be due at repayment* • Plans Extended Repayment for first two years at $1,319 per month • Hopes lower payments will help purchase home by showing lower DTI • Plans to accelerate payments after two years * Due to interest accrual during school and Grace, and capitalization

42. Bradley’s comments • He is just getting started, but wants to have a plan for borrowing and repayment • He knows plans and thus repayment strategy may change over time, but he also knows he can adjust and has multiple repayment options should he need to change repayment strategy • He plans to borrow responsibly and not let debt drive his future career decisions

43. Discussion topics

44. Getting started • Contact the Financial Aid Office • Complete the Free Application for Federal Student Aid (FAFSA) at www.FAFSA.ed.gov • Take steps to ensure you are in Good Standing on any loans borrowed before dental school

45. Working with your FAO • Financial aid may be processed by main campus Financial Aid Office • Ask about FAO staff designated specifically for dental students at both main campus and at your dental school • Financial aid counseling may be online • Take initiative to follow up with questions and/or concerns not addressed online

46. Resources to help • www.GoDental.org • New Web site from American Dental Education Association (ADEA) for students considering dental school • Includes important links • www.finaid.org • Comprehensive Web site on financial aid that includes searchable database for scholarships at www.fastweb.com

47. Resources to help • www.studentaid.ed.gov • U.S. Department of Education site with information on federal aid and resources • www.nslds.ed.gov • Federal repository of student loans* • www.ibrinfo.org • Information about Income Based Repayment and Public Service Loan Forgiveness * Stafford, Grad PLUS, Perkins, Federal Consolidation

48. Resources to help • www.annualcreditreport.com • Only Web site authorized by Federal Trade Commission (FTC) to provide consumers with free credit reports. • www.irs.gov/publications/p970 • Information on tax credits and deductions dental students may be able to use to help offset their cost, including the Student Loan Interest Deduction

49. Discussion topics

50. Takeaways • You’re responsible, you can handle this • Your colleagues have set the bar high regarding responsible repayment • Smart budgeting and responsible borrowing now will help minimize impact of debt on career decisions later • Contact your FAO early and often for help and support